Senior housing’s recovery, both in recovering and occupancy, is “a lot to be optimistic about,” Byron Carlock, real estate leader at PricewaterhouseCoopers, told the McKnight’s Business Daily.
“I’m very pleased to see the industry doing so well. What we’re seeing right now is, it’s looking like it’s a very strong recovery,” he said.
Supply was tempered during the pandemic, and performance was “really hurt,” Carlock said, “but it’s coming back. …The attractiveness of the space for both investment and development is rising up to 2020 but still short of 2019.”
Unfortunately, he added, the shortage of healthcare workers is affecting operations and “could also affect the attractiveness of the living experience.”
Rental housing is trending in popularity among older adults, especially for Americans aged 82 or more years who are in relatively good health, Carlock said.
“This category of ‘younger old’ is driving demand for new rental housing in preparation for moving over to assisted living and skilled nursing,” he said.
Older adults now have more options on where to live, Carlock said, because they are able to sell their homes at premium prices right now.
“Now, it’s very easy to sell a house, and the prices are high. It’s giving the seniors more options to make different decisions,” he said. “For the aging baby boomer [who has] been thinking about it, the market gives privilege to that opportunity.”
For senior housing real estate investors, “the attractiveness [of senior housing], both with respect to meeting rising demand and available supply, may come from repurposing and redeveloping existing facilities, turning apartment buildings into independent living, turning old hospitals into assisted living. The recycling and repurposing of real estate will be a big theme in this next cycle,” Carlock said.
The prime reasons for that prediction, he said, are that “the cost of construction is high and the availability of financing is more often readily available for renovation and repurposing than it is for a ground-up because of the scarcity of land and the expense of construction,” he said.
Carlock added that with the modern focus on ESG — environmental, social and governance issues — the recycling or repurposing of real estate is more environmentally sensitive, especially if the developer is remediating a property that previously was “environmentally tainted.”
“Acquisition activities are subject to high investor attractiveness, but prices are going up, up, up, and yields are going down,” he said. “But if you buy something and repurpose it, renovate it and then look at selling it, you’ve got a step ahead especially in this cost environment.”
